KINDER MORGAN INC

We account for our capital expenditures in accordance with GAAP. Additionally, we distinguish between capital expenditures as follows:

Budgeting of maintenance capital expenditures, which we refer to as sustaining capital expenditures, is done annually on a bottom-up basis. For each of our assets, we budget for and make those sustaining capital expenditures that are necessary to maintain safe and efficient operations, meet customer needs and comply with our operating policies and applicable law. We may budget for and make additional sustaining capital expenditures that we expect to produce economic benefits such as increasing efficiency and/or lowering future expenses. Budgeting and approval of expansion capital expenditures generally occurs periodically throughout the year on a project-by-project basis in response to specific investment opportunities identified by our business segments from which we generally expect to receive sufficient returns to justify the expenditures. Assets comprising expansion capital projects could result in additional sustaining capital expenditures over time. The need for sustaining capital expenditures in respect of newly constructed assets tends to be minimal but tends to increase over time as such assets age and experience wear and tear. Regardless of whether assets result from sustaining or expansion capital expenditures, once completed, the addition of such assets to our depreciable asset base will impact our calculation of depreciation, depletion and amortization over the remaining useful lives of the impacted or resulting assets.

Generally, the determination of whether a capital expenditure is classified as sustaining or as expansion capital expenditures is made on a project level. The classification of our capital expenditures as expansion capital expenditures or as sustaining capital expenditures is made consistent with our accounting policies and is generally a straightforward process, but in certain circumstances can be a matter of management judgment and discretion.

Our capital expenditures for the year ended December 31, 2024, and the amount we expect to spend for 2025 to sustain our assets and expand our business are as follows:

(a)Sustaining capital expenditures by our joint ventures generally do not require cash outlays by us.

(b)Reflects cash contributions to unconsolidated joint ventures. Also includes contributions to an unconsolidated joint venture that are netted within the amount the joint venture declares as a distribution to us.

Our capital investments consist of the following:

(a)Sustaining capital expenditures by our joint ventures generally do not require cash outlays by us.

(b)Reflects cash contributions to unconsolidated joint ventures. Also includes contributions to an unconsolidated joint venture that are netted within the amount the joint venture declares as a distribution to us.

Impact of Regulation

The trend toward increasingly stringent regulations creates uncertainty regarding our capital and operating expenditure requirements over the longer term. For example, the EPA’s final rule known as the “Good Neighbor Plan” (the Plan) became effective on August 4, 2023. As a precursor to the Plan, the EPA disapproved state implementation plans, or SIPs, submitted under the interstate transport (Good Neighbor) provisions of the Clean Air Act for the 2015 Ozone NAAQS. The Plan, which imposes prescriptive emission standards for several sectors, including natural gas pipelines, covers 23 states; however, 12 states were awarded stays pending their respective appeals of the EPA’s disapproval of their SIPs.

Multiple legal challenges to the Plan have been filed, including by us. See Note 17, “Litigation and Environmental—Environmental Matters—Challenge to Federal “Good Neighbor Plan,” to our consolidated financial statements. We believe that the Plan is deeply flawed and that numerous and substantial bases for challenging the Plan exist, as evidenced by the U.S. Supreme Court ruling on June 27, 2024, staying enforcement of the Plan pending a decision by the U.S. Court of Appeals for the District of Columbia (D.C. Circuit) on its pending review of the Plan and any subsequent appeal to the Supreme Court. In reaching its decision, the Supreme Court found that the parties challenging the Plan are likely to prevail on their argument that the Plan was not reasonably explained, that the EPA failed to supply a satisfactory explanation for its action, and that the EPA ignored an important aspect of the problem it was attempting to solve by promulgating the Plan. The EPA has no legal basis to enforce the Plan in any state while the Supreme Court stay remains in place. In addition, the stays of underlying SIP disapprovals also serve to prevent enforcement of the Plan in those states. The D.C. Circuit returned the consolidated cases to its active docket on January 13, 2025; however, on February 6, 2025, the EPA filed a motion asking the court to hold the cases in abeyance for 60 days to allow the Trump Administration time to familiarize themselves with the Plan, receive briefing from the EPA about the cases and the Plan, and decide what action on the Plan, if any, is necessary.

The Plan would require installation of more stringent air pollution controls on hundreds of existing internal combustion engines used by our Natural Gas Pipelines business segment. If the Plan ultimately were to take effect in its current form (including full compliance by a revised compliance deadline (originally May 1, 2026) accounting for the stays, and assuming failure of all challenges to SIP disapprovals and the Plan), we currently estimate that it would have a material impact on us, including estimated costs necessary to comply with the Plan ranging from $1.5 billion to $1.8 billion (including costs for joint ventures that we operate, net to our interests in such joint ventures), potential shortages of equipment resulting in our inability to comply with the Plan, and operational disruptions. Given the extensive pending litigation, and more recently, the change in U.S. presidential administrations and EPA’s filing with the U.S. Court of Appeals for the District of Columbia Circuit on February 6, 2025, impacts of the Plan are difficult to predict. The outcomes of these numerous lawsuits may significantly decrease or delay our exposure. In addition, we would seek to mitigate the impacts and to recover expenditures through adjustments to our rates on our regulated assets where available.

The cost estimates discussed above are preliminary, based on a number of assumptions and subject to significant variation, including outside of the ranges provided. Costs are assumed based on the average cost incurred historically for a typical retrofit of an average engine. These estimates reflect only the anticipated upgrades that would need to be performed (and in the case of joint ventures, only on assets that we operate) and do not take into account potential complications such as additional maintenance requirements that may be identified during the upgrade process.